ECB chief economist Praet out with scheduled speech 14 March
- but we've made substantial progress
- fair to say we are still some way short
- fwd guidance on path of policy, rates will have to be further specified and calibrated
- will be important to monitor yield curve to end of net asset purchases
No surprises in the dovish inflation outlook or rest of it. ECB still with problems as we know.
EURUSD suitably unfazed at 1.2373 but rallies capped again for the moment
Full speech entitled "Assessment of quantitative easing and challenges of policy normalisation" here
He concludes:
While reinvestment will be important to ensure that longer-term interest rates remain sufficiently supportive beyond the horizon of our net asset purchases, the ECB's key interest rates and forward guidance on their expected evolution will once again become our principal means of steering the policy stance.
Our key interest rates are expected to remain at their present levels well past the end of net asset purchases, in line with our forward guidance. Financial markets are currently pricing our forward guidance on rates into the yield curve, which today is fostering steady progress towards a sustained adjustment. In the light of the interactions and complementarities between our different instruments, it will be important to monitor the reaction of the yield curve to the end of our net asset purchases.
With the passage of time, the indication that policy rates will remain at their present levels well past the end of net asset purchases will gradually cease to provide sufficient guidance about the likely evolution of the monetary policy stance. So, our forward guidance on the path of our policy rates will have to be further specified and calibrated as appropriate for inflation to remain on the sustained adjustment path towards levels below, but close to, 2% over the medium term.
